Is Take-Two the Smartest 'Buy' in Gaming?

While much of the holiday 2013 gaming narrative centered on whether or not Sony's PlayStation 4 would beat Microsoft's Xbox One or whether Battlefield 4 from Electronic Arts (NASDAQ: EA) would outsell Call of Duty: Ghosts from Activision Blizzard (NASDAQ: ATVI) , the real winner was Take-Two Interactive (NASDAQ: TTWO) . The company recently announced that its landmark title, Grand Theft Auto 5, has shipped 32.5 million copies and was the best-selling game of 2013. With news like that, it's easy to see why Take-Twocould wind up one of this console cycle's big winners.

Regardless of whether or not Take-Two can supplant EA and Activision and carve out a bigger slice of the publishing pie, the company looks to be a smart short-to-medium-term investment. The truth is, there is less known about Take-Two's next-generation software slate than its competitors. This gives its valuation a greater potential for growth. Is Take-Two Interactive the best "Buy" in gaming?

Grand Theft Auto is top dogOne of the elements that makes investing in the gaming industry attractive is the potential for explosive growth that stems from the market's often topsy-turvy nature. Dedicated gaming companies run businesses that are simpler in organization and scope than most other publicly traded companies. Ubisoft (NASDAQOTH: UBSFF) North American President Laurent Detoc has wisely stated that one of the defining characteristics of the industry is an ability to go from a genius to an idiot overnight and vice versa. The success of Rockstar Studios Grand Theft Auto 5 seems to have kicked off the less desirable of those outcomes for Ubi. Many have pointed to the quality and commercial success of GTA 5 as a contributing factor for the delay of the French publisher's Watch Dogs.

Perhaps the most valuable franchise in gamingThe success of Grand Theft Auto 5 cannot be overstated. The title's performance is a validation of the triple-A console software model and shows that long development cycles that prize attention to detail can pay off in a big way. It also shows that Take-Two knows how to handle its most valuable property and parlay the franchise into even greater success. There is no series in modern gaming that has shown the explosive growth, influence, and staying power of "Grand Theft Auto."

If you're not yet impressed by Grand Theft Auto 5's "best-selling game of the year" credentials, consider that Take-Two's blockbuster accomplished this feat across just two platforms. While "Call of Duty" and "Battlefield" were both available on nearly every platform under the sun, the latest "Grand Theft Auto" has so far only launched on PlayStation 3 and Xbox 360. Extracted data from the Xbox 360 build of the game suggests that an updated version of the game will also hit PlayStation 4, Xbox One, and PC.

Take-Two is more than a one trick ponyThe announcement of a new version of Grand Theft Auto 5 would surely trigger a boost in Take-Two's outlook and an explosive revenue surge upon release. That's not the only trick the company could have up its sleeve, though. Sources are also suggesting that a sequel to Red Dead Redemption, one of the last generation's breakout hits, could debut on the PlayStation 4 and Xbox One consoles as early as this year. As of 2012, Red Dead Redemption had sold over 13 million copies, and a sequel to the well-received game would continue Rockstar's track record of delivering franchise growth.

While news that Electronic Arts has secured its exclusive NFL license for at least another few years puts a damper on Take-Two's possible sporting ventures, the publisher is building a reputation for delivering quality content across genres. The prevalence of microtransactions in the company's NBA 2K14 may have generated controversy, but the game received a much better reaction than EA's critically panned NBA LIVE 14.

The appeal of a good mysteryTake-Two's stock has climbed approximately 50% year-over-year. This puts it on a similar trajectory as EA and on a better path than Activision and Ubisoft. While the latter three publisher's 2014 release cards are largely known commodities, Take-Two's release schedule is still something of a mystery. Look for a new "Read Dead Redemption" and an updated version of Grand Theft Auto 5 to drive Take-Two in the coming year. An announcement for a new "Grand Theft Auto" sequel will likely come sometime in 2015 as well.

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